Michigan LLC Taxes: The Complete Filing Guide (2025)

Michigan LLC Tax Basics

Navigating your Michigan LLC tax obligations doesn’t have to be complicated. We’ll walk you through the essentials of pass-through taxation, explain Michigan’s specific requirements, and highlight strategies to stay compliant and organized. This guide covers everything from federal income taxes to city-specific requirements and filing deadlines.

Use the links below to jump directly to the section you need:

• Michigan LLC Taxes at a Glance
• Understanding LLC Taxation Basics
• Federal Tax Obligations
• Michigan State Taxes
• Local Tax Considerations
• Tax Calendar and Filing Tips
• Tax Strategies for Michigan LLCs
• Forms and Resources

Michigan LLC Taxes at a Glance

Tax Type	Rate	Filing Deadline	Forms Required
Federal Income Tax	10-37% (personal brackets)	April 15, 2025	Form 1040 + Schedule C or Schedule E/K-1
Self-Employment Tax	15.3%	April 15, 2025	Schedule SE
Michigan Income Tax	4.25% (flat rate)	April 15, 2025	Form MI-1040
Federal Payroll Taxes (If Employees)	7.65% employer + 7.65% employee (FICA)	Quarterly (April 30, July 31, October 31, January 31)	Form 941
Michigan Unemployment Tax (If Employees)	2.7-10.3% (new employers: 2.7%)	Quarterly	Form UIA 1028
Federal Unemployment (FUTA)	6% on first $7,000 per employee (0.6% after credits)	January 31, 2026 (annual)	Form 940
Sales & Use Tax	6%	Monthly, quarterly, or annually based on sales volume	Form 5080/5081
City Income Tax	1-2.4% (varies by city)	April 15 (Detroit) / April 30 (most cities)	Varies by city (Detroit, Grand Rapids, etc.)
Annual Statement	$25 fee	February 15, 2025	Form CSCL/CD-2700

Understanding LLC Taxation Basics

How Michigan LLCs Are Taxed By Default

Your Michigan LLC doesn’t pay taxes itself. Instead, profits flow through to you and your members, who report them on personal tax returns. This is called pass-through taxation.

Here’s how it works:

1. Your LLC earns income from business activities
2. The LLC itself files no tax return (unless you elect otherwise)
3. Profits “pass through” to members based on ownership percentage
4. Each member reports their share on their personal tax return
5. Members pay tax at their individual income tax rates

What this means for you: Unlike corporations, your business profits are only taxed once, which typically saves money.

Tax Classification Options

While pass-through taxation is the default, your Michigan LLC can choose alternative tax treatments:

Default LLC Tax Status:

• Single-member LLC: Taxed as a sole proprietorship
• Multi-member LLC: Taxed as a partnership

Optional Tax Classifications:

• S Corporation: Can reduce self-employment taxes by paying “reasonable salaries”
• C Corporation: LLC pays corporate tax on profits, members pay personal tax on distributions (creates double taxation)

Michigan Flow-Through Entity Tax Option:

• Optional tax that allows LLCs taxed as partnerships or S Corps to pay tax at the entity level
• Can help overcome the $10,000 SALT deduction limitation
• Requires 3-year commitment once elected

Not sure which tax classification is right for your business? Schedule a free consultation with 1-800Accountant

Federal Tax Obligations

Income Tax

As a Michigan LLC owner, you’ll report your share of business profits on your personal tax return using:

• Form 1040 + Schedule C (single-member LLCs)
• Form 1040 + Schedule E + Schedule K-1 (multi-member LLCs)

Federal income tax rates range from 10% to 37% based on your tax bracket (actual 2025 brackets will depend on inflation adjustments and any tax law changes).

Simply Put: Whatever money your business makes (after expenses) gets added to your personal tax return, just like income from a job.

Self-Employment Tax

LLC members actively involved in the business must pay self-employment tax of 15.3% (covering Social Security and Medicare) on their share of LLC profits.

Key points:

• Applies to net earnings of $400 or more
• Calculated on Schedule SE
• You can deduct 50% of the self-employment tax as an “above-the-line” deduction, which lowers your adjusted gross income

What happens if I miss this payment? The IRS charges penalties of 0.5% per month plus interest. However, first-time mistakes can often qualify for penalty abatement if you have a clean compliance history.

Employment Taxes

If your LLC has employees, you must:

• Withhold federal income tax
• Pay and withhold FICA taxes (7.65% each for employer and employee)
• Pay federal unemployment tax (FUTA)
• File quarterly employment tax returns (Form 941)
• Provide W-2 forms annually

Estimated completion time: 2-3 hours per quarter (significantly less with payroll software or professional help)

Estimated Tax Payments

Because no tax is withheld from your LLC profits, you’ll likely need to make quarterly estimated tax payments using Form 1040-ES. These payments cover both income and self-employment taxes on your share of the business income. Missing deadlines or underpaying can lead to IRS penalties, even if you pay in full later.

Working with an accountant can help ensure accurate calculations, on-time payments, and a smarter overall tax strategy.

Key deadlines:

• April 15
• June 16
• September 15
• January 15

Pro Tip: Set calendar reminders 15 days before each deadline. This gives you time to prepare without the last-minute rush that leads to mistakes.

Michigan State Taxes

Michigan Income Tax

Michigan has a flat personal income tax rate of 4.25% that applies to your LLC’s profits on your personal return.

Filing requirements:

• Use Michigan Form MI-1040
• Due April 15, 2025
• Michigan follows federal adjusted gross income as a starting point

Bottom Line: For every $1,000 your LLC earns, expect to pay about $42.50 in Michigan state income tax (in addition to federal taxes).

Michigan Flow-Through Entity Tax

This optional tax can benefit many Michigan LLC owners:

• Tax rate: 4.25% (same as personal rate)
• Paid by your LLC instead of individual members
• Members receive a tax credit on their personal returns
• Helps bypass the $10,000 SALT deduction limitation
• Must elect by filing Form 5932 by September 30, 2025
• Commits your LLC to this tax treatment for three years

Real Savings Example: For an LLC with $200,000 in profits, the Flow-Through Entity Tax could save owners up to $8,500 in federal taxes by working around the SALT deduction cap.

Sales and Use Tax

If your Michigan LLC sells physical products or certain services:

• Collect 6% sales tax on taxable sales
• Register for a sales tax license through Michigan Treasury Online
• File and pay collected taxes monthly, quarterly, or annually based on sales volume
• Due dates vary based on filing frequency

60-Second Check: Do I Need to Collect Sales Tax?

• Do you sell physical products in Michigan? → Yes, collect tax
• Do you sell digital products? → Generally not taxable
• Do you provide services? → Most services are exempt (see exceptions below)
• Do you sell online to Michigan customers? → Yes, collect tax

Services typically exempt from sales tax include:

• Professional services (legal, accounting)
• Personal services (haircuts, fitness training)
• Medical services

Products typically subject to sales tax include:

• Tangible personal property
• Prepared food
• Some digital products

Annual Statement Filing

While not a tax, your Michigan LLC must file an annual statement (also known as an annual report):

• Due February 15 each year
• $25 filing fee
• Filed with Department of Licensing and Regulatory Affairs (LARA)
• Two-year grace period before penalties apply

Calendar Alert: Set a reminder for February 1 to ensure you don’t miss this easy but required filing.

Local Tax Considerations

City Income Taxes

Michigan allows cities to impose local income taxes, creating a significant compliance burden for many LLC owners.

Cities with income taxes include:

• Detroit (2.4% residents, 1.2% non-residents)
• Grand Rapids (1.5% residents, 0.75% non-residents)
• Lansing (1% residents, 0.5% non-residents)
• Flint (1% residents, 0.5% non-residents)
• 20 other Michigan cities

Filing requirements:

• Separate returns for each city where you conduct business
• Different forms for each city
• Generally due April 30, 2025
• Multi-city businesses must allocate income based on:
  • Property factor
  • Sales factor
  • Payroll factor

Property Taxes

If your LLC owns real property in Michigan:

• Rates vary by locality
• Assessed annually
• May qualify for various exemptions based on business type
• Personal property tax may apply to business equipment

Tax Calendar and Filing Tips

Key Deadlines for Michigan LLCs

January:

• January 15: Final estimated tax payment for previous year
• January 31: Issue W-2s/1099s to employees/contractors

February:

• February 15: Michigan LLC Annual Statement due

March:

• March 15: Partnership/S-Corp tax returns due

April:

• April 15: Personal tax returns due
• April 15: First quarter estimated tax payment due
• April 30: City income tax returns due

June:

• June 16: Second quarter estimated tax payment due

September:

• September 15: Third quarter estimated tax payment due
• September 30: Flow-Through Entity Tax election deadline (for calendar year taxpayers)

Record-Keeping Checklist

Keep these records for at least 7 years:

• Business income records (invoices, receipts)
• Expense receipts and documentation
• Bank and credit card statements
• Asset purchase and improvement records
• Vehicle mileage logs
• Home office documentation
• Payroll records
• Previous tax returns

Tax Strategies for Michigan LLCs

S Corporation Election Benefits

Converting your LLC to an S Corporation for tax purposes can save on self-employment taxes:

1. File Form 2553 with the IRS
2. Pay yourself a “reasonable salary” subject to employment taxes
3. Take remaining profits as distributions exempt from self-employment tax

Example: An LLC making $100,000 in profit pays 15.3% self-employment tax on the entire amount. As an S Corp, if $60,000 is a reasonable salary and $40,000 is taken as distributions, only the $60,000 is subject to employment taxes.

Potential Savings: In this example, you’d save about $6,120 in self-employment taxes.

Flow-Through Entity Tax Election

Consider electing Michigan’s Flow-Through Entity Tax if:

• You’re affected by the $10,000 SALT deduction cap
• You expect stable or growing profits over the next three years
• All members agree to the election

Business Expense Deductions

Common deductions Michigan LLC owners often overlook:

• Home office deduction
• Business mileage (70¢ per mile for 2025)
• Health insurance premiums
• Retirement plan contributions
• Professional development expenses
• Business meals (50% deductible)

Forms and Resources

Federal Tax Forms

• Schedule C: Profit or Loss From Business (sole proprietors)
• Form 1065: U.S. Return of Partnership Income
• Schedule K-1: Partner’s Share of Income, Deductions, Credits
• Form 1120-S: U.S. Income Tax Return for an S Corporation
• Form 2553: Election by a Small Business Corporation (S Corp)
• Form 8832: Entity Classification Election

Michigan Tax Forms

• Form MI-1040: Michigan Individual Income Tax Return
• Form 5932: Michigan Flow-Through Entity Tax Return
• Form 5080/5081: Sales, Use and Withholding Tax Return

Helpful Resources

• Michigan Department of Treasury
• Michigan Treasury Online
• Internal Revenue Service
• Michigan Department of Licensing and Regulatory Affairs